In 2001, Scott Sanders was a buttoned-down management consultant for staid Andersen Consulting. Then his life took a different turn after a few hot laps in a go-kart during a business trip. It was the beginning of a career in experiential entertainment for the founder of the successful Octane Raceway karting and FEC in Scottsdale, Ariz.
“My last [Andersen] client was in Southern California,” said Sanders. It required an extended visit at the client’s site and he and his colleagues were looking for entertainment after work. “A bunch of guys on my project team were talking about a place where you could go race inside a building,” he recalled. “I went and found it.” The place was Dromo One, a pioneering indoor go-kart track that featured wheel-to-wheel competition in gas-powered karts that went fast. It was a hot attraction for a few years that drew serious racing fans including the staff of legendary car magazine Road & Track, which had its offices nearby. Dromo One was no-frills, just the track and a front desk where drivers signed up to race. Sanders loved the karting action but as a seasoned management consultant, he felt he could do better. He envisioned a concept that would draw people looking for a plusher, more complete entertainment experience that complemented kart racing with games, food, and drink
In 2003 he opened Octane Raceway in Phoenix, Ariz., and 10 years later moved it to a 65,000 square-foot facility in nearby Scottsdale. The sleek, modern facility is designed to deliver the best racing experience imaginable, a unique track layout that begins indoors then winds through an outdoor section before returning inside. The one-third mile track is the only one of its kind in the United States. For the family market, Sanders added an arcade and a restaurant and kept refining the attraction. He switched to electric karts, which he replaces every two to three years. He also continually refreshes his arcade games and the look of the facility. “I always want to have people feel they’re walking into a bright, shiny, new-looking place,” said Sanders. “It’s important to me to have that look and feel.”
“Octane is very focused on racing entertainment, and not just the hardcore racing fans,” Sanders said. One successful move was to push diligently into the corporate events market, which is now 40 percent of Octane Racing’s business. Companies can combine meetings and team-building exercises with karting and other fun activities.
Now he’s raising the bar with a free-roam virtual reality attraction, one of the first in the country.
“I felt virtual reality fit very well with the experiential entertainment that we’re looking to deliver to our customers.”
“People come to do kart racing because they can’t do it at their house.” He realized it was the same with virtual reality. After evaluating several competing systems he chose to go with Velocity VR from Zero Latency of Australia. “It’s a multiplayer, free-roam virtual reality experience game. It’s you and up to eight people [and] you’re in a game together,” said Sanders. “You’re shooting zombies, or you’re clearing out a space station of drones and robots. And you’re doing it as a team, all in the same space. You’re not sitting on your couch.”
In the game, players move through an empty room wearing sophisticated virtual reality headsets connected to a high-performance computer they carry in a backpack. All the game effects are created by the computers and displayed via the virtual reality headsets, so players see each other and the bad guys doing battle in a colorful, action-packed video game setting. Each player has an integrated headphone/microphone for communication as well as a custom-made electronic weapon with which to shoot at the bad guys. To give the players a big enough environment to explore, Sanders needed a much bigger footprint than the typical virtual reality arcade. At first, he considered leasing space next door to Octane Raceway but realized he could contain his costs by repurposing two of his jectors. “So we can just literally, drop in tables and chairs, and [the customers] can have their meeting or their dinner,” Sanders said.
The budget for Sanders’ Zero Latency build-out was in the $800,000 range, a lot more than a modest arcade or laser tag arena. But the high cost was offset by his expectations that his upscale karting customers, who were used to paying $2 a minute, would accept a similar rate for something as new and exciting as virtual reality. Depending on the day of the week, a 45-minute Velocity VR session with two 15 minute rounds of play costs from $40 and $45 per person.
“It was a bit of an experiment,” said Bob Cooney, an attractions industry veteran and the Zero Latency rep who worked with Sanders. “One of the things that Scott liked is that the average customer is a millennial… a 20 to 40-year-old male [with] high, high income. So we thought that it made a lot of sense to combine Zero Latency and high-end karting.” But to make his virtual reality attraction a reality, Sanders needed a bank that was also on the cutting edge of creativity; someone who understood the entertainment industry and was willing to finance something new.
“Virtual reality is a technology play … it’s the leading edge and so it’s considered much more risky than investing in the karting business.”
Fortunately, Sanders already had such a relationship with Live Oak Bank, who had helped Sanders buy out his partners in Octane Raceway a few years before. “They operate differently than a normal bank,” said Sanders. “They basically pair an industry expert with a banking team,” Sanders says Live Oak looked beyond the numbers and visited Octane Raceway to carefully assess the operation and the management team.
Sanders appreciated Live Oak’s knowledge of best practices and their willingness to share information gleaned from other attractions he had been involved with.
Free-roam virtual reality is a new attraction and much of the buzz is being generated by the manufacturer and supplier sectors, not consumers, so Live Oak Bank wanted to make its first foray with a trusted and savvy operator. “For Live Oak to get involved, we had to go with an operator with whom we had a successful relationship. Scott runs a smooth facility and I very much like his approach to planning and due diligence,” said Ben Jones. “That and my feeling that the clientele at Octane Raceway was a good match for a virtual reality attraction made a good combination for success.
Sanders has been successful at leveraging the news appeal of having one of the first Zero Latency attractions in America (there are currently six). “Scott had every local news station out, every newspaper writing about him; he got a ton of free publicity,” said Cooney. “He was able to amplify it to social media marketing and drive sign-ups on websites so he gained more email addresses.” Business has been growing steadily since Sanders launched Velocity VR on Memorial Day weekend this year. The real test will come during the high tourist season during the winter of 2018, and Sanders has been promoting VR to hotel concierges and meeting planners throughout the Phoenix area.
In the meantime virtual reality players are patronizing Sanders’ food and beverage operation to debrief their missions; they are also returning for additional visits for karting and other attractions. “It’s definitely cash flow positive,” said Sanders, “which is great. I also think it continues to push us as a more multi-faceted entertainment venue which in the big picture for me is important.”
Please contact our Entertainment Center Lending team to learn more about how Live Oak Bank can help you reach your goals.